Texas Supreme Court Strikes Down Property Tax

11-22-05 - The way local property taxes are used to support education in Texas is flawed, the state Supreme Court ruled Tuesday, giving authorities until June 1 to fix the system.

The state's highest civil court agreed 7-1 with those challenging the funding system that it amounts to a statewide property tax, which is unconstitutional in Texas.

The judges disagreed with two other arguments brought by the system's opponents, however, finding that overall school funding is adequate and that poor districts have equal access to money for facilities.

Money for the $30 billion Texas school system comes primarily from local property taxes and a loophole-ridden franchise tax.

The state, which has grappled with school finance issues for more than a decade, had argued that great strides had been made in public education and that changes to the funding system should be made by the Legislature, not the courts.

The June 1 deadline established by the court could leave schools without money if issues are not resolved, a legislator said Tuesday.

"This time the Supreme Court has ruled, there is no back door," said state Rep. Dan Branch. "This deadline is a real hard, firm deadline. At that point, you can't finance schools the same way, you have to make the system constitutional, otherwise you run the risk of not being able to open schools in August."

The all-Republican Supreme Court, the state's highest court in civil matters, has been considering the case for months on an appeal from a court in Austin. Both property-rich and poor school districts had sued the state, claiming its method of paying for public education was inadequate.

State District Judge John Dietz agreed with the districts in September 2004 and declared the system unconstitutional. He ordered that the problems be fixed and said otherwise the state would have to halt the funding of schools.

After the Legislature failed to reach a solution on school finance during its regular session this year, Perry called lawmakers into two special sessions during the summer. But, again, the legislators couldn't agree on a plan, and this fall Perry named a commission to recommend ways to restructure the tax system that pays for schools.

Here's a look at major dates in Texas' school finance battle:

- 1989: The Texas Supreme Court throws out the state's school funding law after finding "glaring disparities" between rich and poor school districts. The high court later rules two other Texas school funding plans unconstitutional in the early 1990s.

- 1993: Days before a court-imposed deadline threatened to close Texas schools, the Legislature forces property-rich school districts to share some wealth with poorer ones.

- 2003: Attorneys for property-wealthy school districts argue before the Texas Supreme Court that Robin Hood has created an illegal statewide property tax after many districts have pushed collections to the legal limit.

- April 20, 2004: The Legislature meets in a special session called by Republican Gov. Rick Perry to address school finance. The session ends two days early when lawmakers fail to pass a new plan.

- Sept. 15, 2004: After a trial brought by 300 districts, both rich and poor, a judge rules the education funding system unconstitutional and threatens to order the state to halt school spending in October 2005. Following the judge's written ruling in late November, the state appeals to the Texas Supreme Court.

- Jan. 11, 2005: Legislature convenes in regular session and Perry declares education funding an "emergency." Lawmakers fail to pass a new system before session expires May 30.

- July 6: Attorneys for hundreds of school districts tell Texas Supreme Court justices in oral arguments the state has abdicated its obligation to educate its children. State lawyers argue the Legislature _ not the courts _ should repair Texas' education finance system. The court does not immediately rule.

- July 19: Lawmakers tout their progress on an education spending plan but acknowledge defeat in the current special session of an accompanying bill to reduce property taxes.

- July 20: Special session ends at midnight without passage of an education spending plan or property tax relief bill. Perry calls lawmakers back for another 30-day special session beginning the next day.

- July 21: New special session begins.

- July 26: In bipartisan fashion, the Texas House votes down its own multibillion-dollar school funding bill and property tax relief measure, dimming chances that lawmakers would pass a school finance package this session. House Speaker Tom Craddick says school superintendents were instrumental in persuading lawmakers to oppose the legislation.

- Aug. 4: Craddick says the special session is a waste of time and urges legislative leaders to pull the plug on the remaining two weeks. He suggests lawmakers wait for the court ruling before proceeding. But the Senate rejects the suggestion and vows to press ahead.

- Aug. 9: After a thwarted attempt the previous week, the Senate approves a revised $2.8 billion education spending plan that would have given teachers a pay raise. But the bill was still dependent on a tax-swap bill that had to originate in the House and that never materialized.

- Aug. 15: All but declaring the special session dead, Lt. Gov. David Dewhurst, who presides over the Senate, says solving school funding crisis this late in this session will be extremely difficult because of legislative rules and deadlines.

- Aug. 19: The 30-day special session ends.

- Sept. 21: Perry appoints one-time Democratic rival John Sharp, the former state comptroller, to lead a panel charged with trying to restructure the state tax system that pays for public schools.

- Nov. 14: Sharp says a court-ordered deadline to repair the broken school finance system could be the only way to prompt action from the Legislature.

- Nov. 22: The Texas Supreme Court rules that local property taxes for school funding amount to an unconstitutional statewide tax and gives the state until June 1 to fix the system. The court agreed 7-1 with one of three arguments brought against the state, but found that overall school funding is adequate and that poor districts have equal access to facilities funding.

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